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Tuesday, May 24, 2011

LatAm

It won't be long before a carrier group anchors in the Carribean above Aruba and the Antilles...perhaps my formulation of the Obama Doctrine will come to fruition after all.

The U.S. State Department announced sanctions against Venezuelan state-owned oil company Petroleos de Venezuela (PDVSA) May 24 in retaliation for Venezuela's shipments of gasoline to Iran. The sanctions bar PDVSA from any U.S. government contracts, as well as any U.S.-sourced export/import financing.

According to the State Department, the sanctions will not impact PDVSA's ability to ship oil into the United States, or the operations of its subsidiaries. While it is too early to know the precise impact the sanctions on PDVSA will have, on its face the move appears more symbolic than actually intended to harm PDVSA's business interests.

Venezuelan President Hugo Chavez announced in September 2009 a deal worth $800 million under which Venezuela would ship Iran 20,000 barrels of gasoline per day to supply its domestic consumption needs. Venezuela has admitted to occasional shipments of gasoline between 2009 and 2010, but has also made several statements indicating that it had halted shipments because Iran no longer needed Venezuelan gasoline. Closer to the truth is that the Venezuelan refining sector struggles to meet soaring domestic demand, suffers from a serious lack of maintenance and can barely keep up with its own production needs. Venezuela simply lacks both the excess capacity to supply Iran, and the financial stability to absorb opportunity costs of shipping gasoline halfway around the world.

Another pressing concern for Venezuela is the possibility that it might actually provoke a serious response out of the United States by violating U.N. sanctions against Iran. While relations between the United States and Venezuela appeared to ameliorate briefly in the wake of U.S. President Barack Obama taking office, the two quickly returned to tense relations. The most recent source of tension between the two states was the extradition to Venezuela by Colombia of accused drug kingpin Walid Makled. That U.S. sanctions against PDVSA follow what some interest groups in Washington view as a missed opportunity to gain leverage over Chavez is no coincidence. Pressure has been building in Washington to enact sanctions against Chavez and his regime, including efforts to link the Venezuelan government to international militant organization Hezbollah.